Budget 2012: Reflections
[Update December 28, 2011: links to City’s infrastructure budget page repaired. Also, City’s full summary can be found here. Also, I had 5.38% but the increase was in fact 5.39% because of a rounding error on my end.]
Inclusive of drainage, waste and the tax increases, it will cost $178 more annually for an average household next year. I do realize this is a significant increase on a percentage basis, and is above the Consumer Price Index.
Information of the Utility rates can be found here. As Chair of Council’s Utility Committee I can speak to the year of work that went into understanding the elements driving these rates and rest assured they are justified. However, we are looking at whether there is a fairer way to charge for Waste than the current flat fee.
The tax increase itself was 5.39% in the final budget. 2.25% of this is specifically for priority infrastructure projects, such as financing the new Walterdale Bridge, land acquisition for Southeast to West LRT, and a new police station in the Northwest. The balance (3.14%) covers inflationary impacts plus a modest amount of new spending mainly for policing and crime prevention.
I do think the city can be more efficient with existing resources and I continue to work constructively with the City Manager and City Auditor to identify ways to streamline our business; most people don’t realize that our City Manager has helped trim over $100 million from a $1.88 billion dollar budget over the last three years through improved efficiencies.
I realize that we cannot continue to increase taxes beyond the rate of inflation indefinitely, but I also do not hear a lot of public support for reducing levels of civic service, nor do I hear support for deferring infrastructure investment.
Fundamentally, however, Edmonton has transitioned from a low cost place to do business 10 years ago to one of the most expensive places to do business in North America, mainly because of the higher cost of labour, but also because of higher material and energy costs. The City does business in this same market and that drives cost, which in turn drives fees and taxes.
The answer, of course, is not higher property taxes.
Rather, we need a new deal for municipalities. The City has roughly 5% of a typical family’s tax dollars, but we have well more than 5% of the responsibilities for services and infrastructure. We will continue to struggle until the existing tax dollars are reapportioned and/or until cities are given fairer tax tools.
In fact, I would like to see us move away from property tax, and instead focus on other revenue streams that grow with the economy and respond to income rather than taxing theoretical wealth via property tax, which is often highly regressive for those on fixed incomes.
Nevertheless, the City must move ahead, as we have with the 2012-2014 infrastructure budget. However, the $2.7 billion of planned infrastructure investment in 2012-2014 is down significantly from the $3.6 billion 2009-2011 budget, though it still accelerates work on neighbourhood street and sidewalk renewal and keeps moving on LRT.
We’ve been able to do more in recent years through borrowing (debt) and thanks to increased grants like the Municipal Sustainability Initiative (MSI).
However, MSI was initially to be $1.4 billion annually province-wide, Edmonton’s rightful share of which would be close to $400 million per year, even under a disadvantageous funding formula. However, the most we’ve ever been allocated is $260 million.
Unfourtunately, because of the provincial deficit, the MSI program has been scaled back, with our share falling to around $180 million per year. The provincial government did promise to restore the funds in future years and make up the shortfall down the road.
The province did allow us to ‘fast track’ that money by borrowing against it, so we’re still spending $260 million on MSI-funded projects, on the hope that we’ll be paid back later. This is some of the City’s borrowing I’m more nervous about.
The 2009-2011 budget saw significant borrowing approved, mainly for new rec centres. In the budget before that, borrowing was authorized for the South LRT. Debt, as in these noted cases, makes sense (just like a mortgage) to pay for certain projects that are of city-wide impact, when rates are low, and while costs are down. And we’ve needed it to keep building the city.
There absolutely are limits to how much the city can borrow, but we’re still a way from those limits, even with the 2012-2014 borrowing.
However, new arena construction and related projects will take us closer to those debt limits.
Ultimately, debt capacity won’t always be available, and the conditions won’t always be right to use it. In the long term, building our infrastructure will require more ongoing cash from provincial and federal partners. The upcoming provincial election is a good time to ask candidates for their views on predictable and sustained infrastructure support for cities.